Policy Making, Industrial Structure and Economic Growth in a Dual Economy

This paper discusses a new growth mode, a country with a dual economic structure in which each economic sector will receive different government policies such as financial and fiscal policies. Firstly It obtains the economic growth rate and the growth rate of per capita output in the balanced growth path. Secondly it shows how different policy allocations and current industrial structure influence the economic growth. This model also reveals several other factors such as technology progress and population flow which have effect on economic growth. More importantly, two types of "traps" which are often neglected by policymaker are pointed out and given names. They are “Policy Trap” and “Labor-force Flow Trap” which deserve the attentions of policymaker.